Nifty 50 December quarter profit falls 8.1% YoY; revenue growth turns double-digit

markets

• Nifty 50 net profit fell 8.1 percent, first drop in 13 quarters
• Revenue up 10%, first double-digit growth since March 2023
• Labour code changes hit margins; impact seen as one-off charge

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December quarter earnings for Nifty 50 companies recorded a year-on-year decline, marking the first contraction in 13 quarters amid the impact of the new labour code. Aggregate net profit of 37 Nifty 50 companies fell 8.1 percent from a year earlier, the first negative growth since the September 2022 quarter.

However, topline growth turned positive, with revenue rising 10 percent during the quarter, the first double-digit growth since the March 2023 quarter. Operating profit grew 7.5 percent year on year, compared with 6.1 percent growth in the September quarter and 5 percent growth in the year-ago period. The analysis excludes banks, financial services and oil and gas companies, which follow distinct revenue models.

Analysts said there were signs of a recovery in consumption, with revenue growth accelerating sequentially from 16 percent to 20 percent in 3QFY26, the first quarter after the GST cut. Autos led the expansion, with growth rising from 14 percent to 21 percent. Staples remained flat at around 13 percent year on year. Jewellery growth gathered pace, driven by gold price inflation. Retail growth was flat, while hotels and quick-service restaurant segments stabilised.

Margins contracted during the quarter due to the implementation of the new labour codes, which mandate basic salaries to be raised to 50 percent of overall cost to company, increasing gratuity costs for many firms. Analysts estimated an around 5 percent impact on overall profit after tax for the quarter, with technology seeing a 13 percent hit and discretionary 6.5 percent. The impact was described as a one-off, non-cash charge that affected reported earnings. Adjusting for the labour code impact, the share of negative surprises would have declined from 47 percent to 27 percent.

Tata Steel, TCS and Bharti Airtel contributed 78 percent of the incremental year-on-year accretion in earnings, while Tata Motors passenger vehicles, Cipla and InterGlobe Aviation weighed on overall earnings. Within the index, 10 companies reported lower-than-expected profits, 14 delivered earnings beats and 26 posted in-line results.

Four companies exceeded analysts’ EBITDA estimates by more than 5 percent, while two missed estimates by over 5 percent. Companies reporting better-than-expected EBITDA included BEL, Power Grid, Sun Pharma and UltraTech Cement, supported by stronger sales, higher margins, asset capitalisation, growth in innovative medicines and improved volumes. Notable underperformers at the EBITDA level were Cipla, due to lower US sales, and Coal India, on account of higher-than-expected employee costs.

At the net income level, companies that significantly outperformed estimates included Eternal, JSW Steel, Sun Pharma, Tata Motors passenger vehicles, Tata Group entities on lower-than-expected tax outgo, and UltraTech Cement. Companies that underperformed estimates were Cipla, Maruti Suzuki and Wipro.

According to Emkay Research, earnings forecasts largely held up during the Q3FY26 results season, with negligible changes to FY26 at minus 0.3 percent and FY27 at minus 0.9 percent for the Nifty. The consensus indicates that 47 percent of the covered universe of 504 stocks is expected to post more than 25 percent profit after tax growth in FY27, compared with 32 percent in FY26.

For BSE 500 companies, despite the labour code impact, overall earnings remained strong. The BSE 500 reported 16 percent year-on-year profit after tax growth, with energy at 40 percent and discretionary at 26 percent leading the gains, while technology lagged at 7 percent. EBITDA margin for the BSE 500 declined 35 basis points quarter on quarter.

Topline growth for the BSE 500 touched double digits for the first time in eight quarters, supported by consumption trends. The share of companies delivering more than 25 percent profit after tax growth rose to 37 percent in Q3 from 35 percent in Q2, while the share of companies reporting negative growth declined from 33 percent to 26 percent. Analysts said these trends point to signs of a consumption-led earnings recovery.